Investing In Child ULIPs : A Wise Option For Your Child's Future

Parenthood is the most beautiful and at the same time, the most challenging phase of your life. You have to take care of the emotional, physical, intellectual, and social upbringing of your child. A lot of expenses are involved in raising a child like school fees, health care costs, a perfect lifestyle, etc.  

Over the years, education has become very expensive and comprises a major chunk of child care expenses. Saving your child’s future is one of the most important goals when it comes to financial planning. Therefore, one must invest judiciously to get good returns for a safe and happy future for your child.

Funding higher education for your child is the biggest challenge because the cost has been rising every year. MBA course fees in India can cost anywhere between Rs 20-30 lacs. While an MBBS can cost between Rs 25-50 lacs, an engineering degree can cost between Rs 10-15 lacs in India. If you want your child to study abroad, then the fees are much higher considering the rate of education inflation and foreign exchange currency rate.

What are Child ULIPs?
Policybazaar offers Child Unit Linked Investment Plans which are investment cum insurance plans that allow you to invest and build a corpus over a period of time for your child’s future. The maturity amount is given to the child to fund his/her higher education.

Advantages of Child ULIPs
The biggest advantage of these plans is that they provide a waiver of premium options wherein, in case of an unfortunate event of the demise of the parent, the future premiums are paid by the insurance company thus securing the child’s future. So, the parent’s demise doesn’t affect the Child ULIP’s continuity. Lump-sum life cover is also paid out to the nominee. Some plans also offer monthly income to the child to pay for regular expenses.

You certainly don’t want your child to be deprived of his/her dreams in your absence. Therefore, a child ULIP plan comes in handy to act as a safety net in such circumstances. In addition to these advantages, your premiums are exempt from tax under section 80(C) and the maturity amount is exempt from tax under section 10(10D) of the Income Tax Act, 1961.

When should you invest?
You can start by investing within 30 days of your child’s birth to build a huge corpus. Keeping a long-term horizon gives good returns especially since it’s an equity-linked product. You can choose your policy term and premium paying term on your own depending on the time when your child will need funds to pursue higher education. Premium paying term varies between 5,7,10,15,16,17,18,19,20 years and policy term varies between 15, 18 and 20 years. You can invest monthly or annually. Monthly investment can be done in the range of Rs 1,000 to 2,00,000 and annually in the range of Rs 12,000- Rs 24,00,000.

Child ULIPs vs government investment schemes
Child ULIPs provide unique triple benefits such as future premiums paid by insurers on a parent’s death, monthly income to fund a child’s education on a parent’s demise, and lump sum payout to the family. These benefits aren’t provided by the government’s investment scheme such as Sukanya Samridhi Yojana or Public Provident Fund. The minimum returns for child ULIP range between 10-12% whereas it is 7.6% for Sukanya Samridhi Yojana and 7.1% for PPF. 

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